A bond payable is dated January 1, 2017, and is issued on that date. The face value of the bond is $75,000, and the face rate of interest is 8%. The bond pays interest semiannually. The bond will mature in five years.

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

Required:

If required, round your answers to nearest dollar.

1. What will be the issue price of the bond if the market rate of interest is 6% at the time of issuance? $_______________

2. What will be the issue price of the bond if the market rate of interest is 8% at the time of issuance? $_______________

3. What will be the issue price of the bond if the market rate of interest is 10% at the time of issuance? $_______________

2) Gain or Loss on Bonds

Bonds payable are dated January 1, 2017, and are issued on that date. The face value of the bonds is $150,000, and the face rate of interest is 10%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 8%. Assume that the bonds are redeemed on December 31, 2017, at 105, when carrying value was $160,098.75.

Use the appropriate present value table:

PV of $1 and PV of Annuity of $1

Required:

Question Content Area

1. Calculate the gain or loss on bond redemption. Round your answer to two decimal places.

$_______________

Identify and analyze the effect of the bond redemption. Round your answers to two decimal places. If an amount box does not require an entry, leave it blank